Valuing the Invaluable

Contents

Valuing Protected Natural Ecologies

Revisiting a decade-old report in early March 2015 on the future prospects of Australia’s Great Barrier Reef reminded its two authors that one of us coined the phrase “Valuing the Invaluable” as a theme for the economic analysis in the report.[1] We were struck then by how deeply one must dig for available data to enlighten the knowledge of environmental damage — a problem which also haunts this series of papers describing the Music Trust’s scenario-planning project.

The Great Barrier Reef report showed the components of what is called Total Economic Value. It is often known just by the acronym TEV which it has earned as a generally accepted and widely used concept. However, it is not defined in the same way in all the research work. The discussion of sources in Section 4 shows that there are many different interpretations and uses in public funding policy and other cultural planning — indeed most represent cost-benefit analysis of individual projects rather than the holistic long-term view illustrated by Chart 1.[2]

Some of these components can be translated into numbers, but many others cannot. Hence the reference to the original theme in the GBR report in the title of this paper. The definition related to the environmental concept of a protected area, which can range widely in size from an entire ecosystem like the GBR (or the Himalayas or the Antarctic), to a single locality. The broader perspective supports the analysis of ecological risks; the detailed view encourages cost-benefit analysis which is largely incompatible with the broader perspective. Chart 1 was designed for this paper which puts the main TEV components into context with one another. Each component is defined by whether it is or will be used, and if used, the nature of this usage.

The total economic value of a protected resource consists of its use and non-use values. The borders of the concentric circles in Chart 1 also illustrate the degree of precision that can be assigned to each. The central circle representing the direct values that are derived from the protected area is the most precise – most of these values are defined by markets that can be quantified, at least in principle. The next layer is the indirect use values, largely associated with the ecological services the protected area provides, and much less capable of being put into numbers (cost-benefit analysis might assist in this area provided most or all the ecological services can be identified). The third layer is one step further up the ladder of difficulty: options to use the area for some future purpose which is not currently taken up. This includes the future value of information which is often cited as particularly important for biodiversity as untested genes may provide future inputs into agricultural, pharmaceutical or cosmetic products. Chart 1 illustrates the lack of numerical definition by showing only a dotted line at the outer border of the light-blue area.

Which brings us to the non-use values — values humans hold for a protected area which are not linked to the use of the area. Bequest values relate to the benefit of knowing that others will benefit from the area in the future if it is properly protected. Existence values reflect the benefit of knowing that the protected area will exist in future, whether or not those advocating the benefit ever get to visit it themselves.[3]

The outer circle on the graph was deliberately designed to show soft edges which could have been extended much further not just to demonstrate the virtual impossibility of measuring these values, but also the fact that protected areas are part of a vast network of interrelationships — we all live on one small planet along the same interconnected oceans and on the same continents, and with an escalating threat of climate change.

Does it Work in a Cultural Context?

The similarity between ecological and cultural capital has been discussed many times on this Knowledge Base — both have medium- to long-term rather than immediate impacts, policy responses can be postponed because they are regarded as junior partners in mainstream economic policy-making, and their impact is hard to measure in GDP terms, which remains the universal measure of economic growth. We note that cultural policy has not sparked the same political controversy as its environmental counterpart because it doesn’t quite possess the same planet-threatening quality — to use a colossal euphemism it “merely” threatens the global and local diversity and soul of the earth’s societies and cultures.

Chart 2 demonstrates that the music sector, an essential part of Australian culture, appears to have elements similar to what Chart 1 showed for protected areas or ecosystems. Direct use value, measurable at least in principle, would be largely (perhaps almost completely) market-based. The indirect use value, which is not market-based and therefore hard to measure directly in economic terms, would include cultural functions such as early childhood exposure to music with its impact on future musical ability and stimulus to abilities beyond music. Option values — postponed future effects — would incorporate the future value of information derived from current musical activities as an important component. The sources of this future knowledge are current activities ranging widely from community music to music education, and the current hard and soft infrastructure behind musical performance from pop to classical.

The boundary between this outer layer of use values and the values that have been dubbed non-use may appear vague, again acknowledged by a dotted line bounding the option values. The non-use values are best expressed in terms of the cultural development associated with music, including the ambience derived from the changing population structure, general education levels, exposure to other cultures internationally, ability to innovate and other factors that extend beyond music as an art form — hence the term “non-use” value.

Again, these values may be of both the bequest kind (having others benefit in future from general cultural patterns today) and the existence kind (the existing character of Australian culture generally).

The Ecology of Culture

A 40-page report for the UK Arts and Humanities Research Council, by John Holden, envisages culture as ecology (January 2015). This closes the circle begun in this paper, written to explore the parallel between the economic value of protected natural areas and that of the music sector. In both cases what can be put into statistical measures falls short of the real value. Professor Holden deals with "the complex interdependencies that shape the demand for and production of arts and cultural offerings" which he calls the ecology of culture. He was quoted in the previous paper in this series [1] saying that culture is an organism, messier and more dynamic than linear models allow. A YouTube quotation on the opening page of the report encapsulates "culture as ecology", and by implication specific parts of the cultural sector such as music:

"I think the real strength of the creative industries in the UK is the fact that they’ve come together, that fashion works with film, that films work with video games, that video games work with advertising, with craft, and they are all working together in this very strong ecosystem across the UK." (Nicola Mendelsohn)

Holden's concluding chapter asks: What next? Future approaches to cultural ecology. His theme is: "The ecology of culture is an intricate web of connections, both internally — with movement of ideas, people, products and money around the whole system — and externally into a wide range of other fields." Not surprisingly, much or most of the ecology of culture cannot be counted in numbers, but the chapter identifies a number of approaches that can be read in more detail in the report.

In summary, he suggests:

Look at local or specific categories that can be more readily understood because of their scale or specificity

Map small-scale networks and enhance this network analysis by analyzing the role of organisations and the people who are connected to their ecology

Use ecological concepts in the field of culture to assess the health of the cultural ecology — measure the vital signs. For example, systemic health can be measured in terms of trends on the variety and number of different types of theatres, concerts halls and other venues, and what they are doing

Increasing complexity is another sign of health — "a healthy ecology should be generative".

Any available statistics should of course be collected — anything to show (for instance) indicators of artist numbers, economic activity relating to culture, range of art forms, cultural educational opportunities in schools and for adult learning. Qualitative measures include audience experience, critical responses to what is offered, organisational relationships including levels of government involvement, and much else.

In conclusion, the limitations to "valuing the invaluable" will exist for the foreseeable future (and judging from the suggestions will involve much building-up from a "micro" level, as well as collecting aggregate data), but there are important new initiatives at least in the UK. They include qualitative and quantitative analysis by the Department for Culture, Media and Sport, and new measures of qualitative assessment being developed elsewhere, including the Manchester Metrics Project of measuring quality in the cultural sector, by Catherine Bunting and John Knell (2014).

Research into Cultural Heritage

A recent literature review by two cultural economists, from Germany and Russia, lists 87 documents dealing with this topic.[4] Many of these represent case studies based on models of supply and demand, economic impact assessments and job creation, often using techniques which may work well on a project basis but largely ignore the cultural impact which is our concern here as demonstrated by Chart 2. Economists and business people share a penchant for wanting to measure everything, tending to reject things that are not capable of precise computing. Tourism operators and others use contingent valuation methods such as asking visitors about their willingness to pay for a benefit or their willingness to tolerate the loss of one. It stands to reason that asking lay people such questions is unlikely to capture the true ecological value of a protected area, and by extension, the true cultural value of an art form.

What is of most interest from our point of view is those essays that develop the philosophy of heritage and its intrinsic cultural and economic value. They are a minority in the review; most of them deal with the built heritage, such as museums, on which the authors comment that they are of a long-term nature where it may be several years before return on the investment can be expected — often longer than the political cycle of policy-makers (p 137). Even these broader approaches stop short of identifying anything paralleling the ecological model in Chart 1, and by implication the cultural model in Chart 2.

Despite repeated reference to the value of cultural heritage, the perception of intrinsic cultural value appears to be losing compared with its instrumental importance for social and economic development, although some of the authors warn against neglecting the intrinsic value of heritage in the collective memory of the society. The most positive point is the reviewers’ comment (p 7) that culture, and heritage as its indispensable part, is now considered by many authors to be adding a fourth pillar on an equal footing with social, environmental and economic pillars of sustainable development. It is assumed in Chart 3 that adding culture may be mainly reinforcing the social pillar. Be that as it may, true sustainability is confined to the smallish area on Chart 3 where the social (socio-cultural), environmental and economic spheres overlap.

The main impression from this source is that there is a chasm between ecological and cultural research — the twain have not met yet. In fact, Wikipedia’s illustration in Chart 3 appears to be the only reference to the environment anywhere in the report, at least in the reviewers’ comments on the literature in its introductory and concluding sections.

In a report to the British Department for Culture, Media and Sport[5], David O’Brien notes (p 8): “Proving the worth of the cultural sector on its own terms, or what commentators have described as the ‘intrinsic’, as opposed to ‘instrumental’, value of culture has proved problematic since these issues emerged in light of changes within central government’s funding of the arts in the 1980s."

Her Majesty’s Treasury’s Green Book on policy appraisal and evaluation stresses the need for cost-benefit analysis of government decisions and so O'Brien's report considers a range of methods that may be compatible with the Treasury stipulations. These are all variations of survey techniques including contingent valuation and choice modelling, designed to capture users’ and non-users’ valuations of culture for use in cost-benefit analysis (pp 6-7). The central recommendation is that the Department “should create clear guidelines on measuring cultural value based on the Green Book-consistent economic valuation techniques described in this report.” (p 48)

While it is respected that this paper was written to support principles of public funding which are in line with Treasury guidelines, the purpose with our scenarios is to establish a total valuation of how the music sector fits into and supports Australia’s culture. Valuing the invaluable, whether in nature or culture, goes far beyond the values obtained in a cost-benefit analysis of specific projects by asking people what they are willing to pay.

In Australia, Arts Victoria in 2012 commissioned the Australian consulting arm of the major global accounting and consulting firm KMPG to estimate the economic impact of arts and culture in Victoria.[6] The result is solid economic analysis based on official data from the Australian Bureau of Statistics. Arts and culture are comprehensively defined from these statistics across the gamut from museums and libraries through parks, gardens and zoos, to community arts and cultural development. Culture defined in this way accounted for 3.1% of Victoria’s employment in 2011. It is a potentially important methodological source of our modelling for the numerical music scenarios due in mid-2015. But we don’t detract from our respect for this research by saying that in terms of the arguments in this paper, it represents a minimum estimate of the impact of culture in Victoria. We will ourselves add considerably to the statistical database over the next few months (from April 2015 when the initial music scenarios are due to be finished), as we have indeed done over the life of the Knowledge Base, and for many years before it was created.

A recent news item (January 2015), from the National Endowment for the Arts (NEA) in America, reveals new findings about the impact of arts and cultural activities on GDP, and how and why Americans participate in certain arts activities.[7] Again, the reports are largely statistical, but American arts and culture is well researched and some of the further work associated with the scenarios should be directed towards American sources, both for data methodology and deeper insights.

Apart from arts and other cultural statistics, we expect academic papers to yield insights both for further analysis of the real Total Economic Value of cultural activities, and for further insights into the scenario values. One possible example only will serve as a reminder, providing a socio-cultural and economic valuation of ecosystem services in a Mediterranean region.[8]

We acknowledge that the understanding of the total value of cultural activities has just begun and can be augmented from many more statistical, economic, scientific and other sources. But we hope this leap into “valuing the invaluable” has taken some important steps towards full understanding, including a deeper perception of what scenarios are about. We welcome, of course, any suggestions on how to improve this research.

↑With the spread of television, the Internet and other high-quality visual media, the opportunity to experience an area has been vastly enhanced even without visiting it. Exposure to greater knowledge like this is a positive factor in the process of preserving threatened natural resources.

↑Titled Surprising Findings in Three New NEA Reports on the Arts, it announces three reports all dating from 2012, for the first time showing a comprehensive statistical view of a single year in the life of the arts and cultural sector from three different angles: supply, demand, and motivations for consumer behaviour. The three reports are: When Going Gets Tough: Barriers and Motivations Affecting Arts Attendance, A Decade of Arts Engagement: Findings from the Survey of Public Participation in the Arts, 2002-2012, and The Arts and Cultural Production Satellite Account (ACPSA). They can all be downloaded from the NEA website.